Commodities trader and mining giant Glencore PLC (LON:GLEN) has hiked its offer to buy Rio Tinto PLC’s (LON:RIO) Australian coal business, despite the fellow blue chip firm having agreed a deal to sell it to China-backed Yancoal earlier this week.
Glencore said it is offering US$2.675bn in cash, plus a coal price linked royalty for Rio’s Coal & Allied (C&A) subsidiary, an increase on its US$2.55bn offer made earlier this month, and at least US$225mln greater than Yancoal’s proposal.
In a statement, the FTSE 100-listed firm said: “We believe the Glencore Offer satisfies the criteria for a ‘superior proposal.’ It delivers substantially greater value to Rio Tinto shareholders and low deal completion risk.”
READ: Glencore and Yancoal in bidding war for Rio Tinto's Australian coal mines
Glencore added: “Rio Tinto must provide Yancoal with the opportunity to present a counter offer. If any such counter offer is determined by the Rio Tinto board to be equally or no less favourable than the competing proposal, then Rio Tinto must accept the Yancoal counter offer.”
On Tuesday, Rio Tinto said it had selected Yancoal to buy C&A for $2.45bn because it believed the Chinese firm's offer could be completed more quickly as it had regulatory approvals.
Although subject to a limited number of regulatory approvals, Glencore said it was demonstrating its confidence it would get them with a US$225mln deposit, which it will forfeit if the transaction does not go ahead.
Japanese approval already obtained
It said it already has approval from Japan where the majority of the coal would be shipped.
Glencore also reiterated an earlier pledge it would ensure its net debt to underlying earnings (EBITDA) ratio was no greater than 2:1 by selling some assets should it complete the deal.
It said the offer would automatically lapse if Rio Tinto did not declare it to be the superior offer on June 26 and subsequently if a binding sales agreement is not clinched on July 5.
Glencore, which already owns mines near the Coal & Allied assets in New South Wales, has previously said it would also buy Mitsubishi’s minority stakes in some of the mines for US$920mln if Rio accepts the takeover offer.
Glencore operates 18 open-cut and underground coalmines in Australia; Yancoal currently operates several mines across Australia, including in New South Wales
Rio is offloading its coal mines in Australia amid falling prices and market volatility.